Blur, the influential NFT Marketplace for pro traders, has unveiled Blend, an innovative peer-to-peer perpetual lending protocol designed to unlock NFT liquidity and power new growth in the token market. Developed in collaboration with Dan Robinson and Transmissions11 of Paradigm and Seaport, Blend offers market-defined interest rates for unlimited borrowing with no fees applied to either borrowers or lenders. Moreover, by eliminating oracle dependencies from the core protocol, Blend increases security and transparency.
This new protocol sidesteps short expiry dates that put collateral NFTs at risk, a feature that sets it apart from other NFT-lending solutions. Blend loans don’t expire, but accrue interest at predetermined rates until borrowers settle the debt. Lenders can capitalize on this through loaning established, low-risk NFT collections at lower rates or more volatile ones at higher rates as per their risk appetite.
For the borrowers, the new lending mechanism offers easy access to liquidity, making NFT markets even more attractive as valued collateral. As a result, established NFT collections benefit from reduced trading pressure, and new collections can attract more buyers.
However, Blend’s innovative approach also poses risks to both lenders and borrowers. Borrowers can potentially face losses if their loan remains unpaid and the accrued interest surpasses the collateral’s NFT value. If the loan auction is initiated, borrowers get 24 hours to settle their debt. Should they fail to do so, the loan’s interest rate is raised to entice other lenders. In case another lender buys off the loan, the original borrower would then be caught in a cycle of increasing interest rates.
Meanwhile, lenders can face their own challenges: borrowers might not repay their debt, or other lenders may not be willing to buy an inflated loan. In such cases, lenders receive the collateral NFT 30 hours after initiating the auction.
Blend certainly brings exciting opportunities to NFT holders, providing an innovative approach to liquidity and the potential for novel financial opportunities. However, market participants must carefully weigh the promise of increased liquidity access against the inherent risks of perpetual loans. Despite this caveat, Blend’s launch marks a bold step forward for the NFT ecosystem, opening new avenues for token holders and lenders alike.